Can Ordinary Investors Take the Truth?

Jeffrey Goldberg's great article Why I Fired My Broker in The Atlantic delivers a big dose of bitter medicine on a timely topic: How can the ordinary investor recover?

Anyone with more than a few dollars in the stock market might benefit from reading this article.

Link: Why I Fired My Broker – The Atlantic (May 2009).

It turns out that my crucial mistake was believing that the brokers and wealth managers and cable-television oracles who make up the financial-services industrial complex actually had my best interests at heart. Or so say the extremely smart—and wealthy—people I asked to help me figure a way out of my paralysis. One of these people was Robert Soros, the deputy chairman of the fund started by his father, George. I went to see him at his office, where he spent two hours performing an autopsy on my assumptions.

“You think a brokerage should be a place you go to pay commissions for fair and unbiased advice, right?” he asked.

“Yes,” I said.

“It’s not. It never has been.” He then cited another saying of Buffett’s: “‘Wall Street is a place where whatever can be sold will be sold.’ You are the consumer of their dreck. What they can sell to you, they will sell to you.”

“But they told us—”

“They lied.”

He went on: “You should be disheartened and disappointed. But don’t kid yourself. You’re a naive capitalist. They were never your advisers. Do not for a moment think that a brokerage firm is your friend.”

“So who’s my friend?”

“You don’t have one. This is the market.”

“Okay, that’s Merrill Lynch. What about the others?”

“They’re not your friends,” Soros said patiently.

“What about Chuck Schwab?”

“All brokers move products based on volume and commission,” he said.

Small Farms To Be Regulated Out of Business

The End of Small Farms? What you should know about HR 875, HR 759, NAIS and Monsanto

America's small farmers are under attack through a series of bills presented under the guise of "food safety." I don't want to lose my freedom to grow, buy and eat real foods. Let's fight for our small farmers who not only need our protection and support, but actual freeing from government intrusion, control and harm. http://www.breakthematrix.com/node/34734

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Sources of Information:
http://breakthematrix.com/node/34557

Is Obama A Green Bush?

Chris Martenson understands what is really going on at the highest levels of government. In this blog post, he describes how that the Obama administration is beholden to Wall Street – like the Bush administration. As he points out, the U.S. Treasury can no longer afford to cover Wall Street's bad bets while letting them make huge profits on their good bets. Excerpts below.

Link: America is Being Looted – Apr. 14, 2009 | Blogs at Chris Martenson

…it is vitally important not just that conflict of interest be absent when big money is involved in policy decisions, but also that the appearance of conflict of interest be absent. Our system of money is based on confidence (after all it is a Ponzi scheme) and therefore it is vital that our checks and balances assure that the public good is not abused by a few at the expense of the many.

In order for the average person to pull hard on the yoke of life, straining to earn their daily wage, that wage has to be worth something. What is money “worth,” if some of us have to work to exhaustion to obtain it while a very small minority can literally conjure trillions out of thin air and distribute it amongst themselves?

Money is a social contract, especially fiat money, and abusing the trust inherent to making that money system work is the gravest of all possible errors. I am not exaggerating here.

This week I found out that, even as Lawrence Summers, in his role as President of Harvard University, was excoriating professor Cornell West for shirking his professorial duties by making a spoken-word audio CD, he was himself moonlighting for a hedge fund and various Wall Street banks earning millions. Here’s Frank Rich in the NYT:

Lawrence Summers, the president’s chief economic adviser, made $5.2 million in 2008 from a hedge fund, D. E. Shaw, for a one-day-a-week job. He also earned $2.7 million in speaking fees from the likes of Citigroup and Goldman Sachs.

Those institutions are not merely the beneficiaries of taxpayers’ bailouts since the crash. They also benefited during the boom from government favors: the Wall Street deregulation that both Summers and Robert Rubin, his mentor and predecessor as Treasury secretary, championed in the Clinton administration.

This goes well beyond “the appearance of” a conflict of interest. If Summers were a judge, he’d have to recuse himself from the case. Nearly $8 million in a few years from Wall Street is a conflict of interest.  A massive one. 

However, if smoking guns are more your thing, then this next bit of information from the same article will be to your liking:

Summers had done consulting work for another hedge fund, Taconic Capital Advisors, from 2004 to 2006, while still president of Harvard. He tried — and, mercifully, failed — to install the co-founder of Taconic in the job of running the TARP bailouts.

Think of the judgment of a person, long in the public eye, who has apparently learned nothing from his past scrapes with public perception, who attempts to install a past patron in a plum post involving public money being distributed to private, already wealthy recipients.

Think of the character of a person who can rationalize the act of publicly excoriating a professor for doing something that he is secretly doing himself, but on a much grander scale.

That person is Lawrence Summers, the man chosen by the Obama team to coordinate the bailout efforts.

Rahm Emanuel, the current White House Chief of Staff, comes similarly burdened:

…the banking industry recently paid Rahm Emanuel $16 million for about two years of work. That investment was recently paid back when, as President Obama's chief of staff, Emanuel led the January campaign to release another $350 billion in bank bailout funds.

But it goes deeper than that. Rahm Emanuel also took what I consider to be a lot of money serving on the board of Freddie Mac, a company that is certain to cost taxpayers hundreds of billions of dollars.

Before its portfolio of bad loans helped trigger the current housing crisis, mortgage giant Freddie Mac was the focus of a major accounting scandal that led to a management shake-up, huge fines and scalding condemnation of passive directors by a top federal regulator.

One of those allegedly asleep-at-the-switch board members was Chicago's Rahm Emanuel—now chief of staff to President Barack Obama—who made at least $320,000 for a 14-month stint at Freddie Mac that required little effort.

Before Timothy Geithner (“Turbo Tax Timmy,” as he’s called in some circles) was appointed to the Treasury position, his career and connections were explored in depth in an excellent article in Portfolio.com by Gary Weiss:

After the Bear deal, the Fed wound up with $30 billion in collateral, mostly in the form of subprime-mortgage securities. Even Paul Volcker, the former Fed chairman who served on the search committee that picked Geithner and who still holds him in high regard, has expressed queasiness about the way the deal was structured. In a speech to the Economic Club of New York, Volcker said the Fed took actions that “extend to the very edge of its lawful and implied powers, transcending certain long-embedded central-banking principles and practices.” Volcker later leavened this harsh assessment a bit, telling me that the Fed’s intervention “was a proper action, but it was extraordinary—something that’s never been done before, in terms of calling upon that emergency power. It tells you how seriously they took it.”

Still, misgivings about the deal are hard to ignore, no matter how catastrophic the consequences of not intervening might have been. It doesn’t help that the deal is teeming with connections that are sure to raise questions. Dimon is one of the three class-A directors of the board of the New York Fed, and its head is Stephen Friedman, a former Goldman Sachs chairman, who still sits on the investment bank’s board. The New York Fed’s board also includes Richard Fuld of Lehman Brothers, a firm that is another oft-rumored potential candidate for a bailout. Fuld is a class-B director, meaning that he is elected by member banks, astoundingly, to represent the public. (Friedman is also supposed to be looking out for you: He was “appointed by the board of governors to represent the public.”) Thus Geithner reports to a board that is composed of people who are not only under his purview but would also benefit from any potential bailouts. The structure of the New York Fed’s board bears more than a passing resemblance to that of the New York Stock Exchange in the bad old days, when member firms, regulated by the N.Y.S.E., were heavily represented on its board.

Even more intriguing is Geithner’s informal brain trust, loaded with Wall Street luminaries. Since coming to the Fed in November 2003—recruited by then-New York Fed chairman Pete Peterson, co-founder of the Blackstone Group—Geithner has learned the ways of the financial industry at the feet of some of its biggest legends. He was almost immediately taken under the wing of Gerald Corrigan, a gregarious former New York Fed chief who is now a managing director of Goldman Sachs. Corrigan describes his relationship with Geithner as close, and it has flourished since Geithner’s first days at the Fed. Another frequent adviser—“you don’t want those things to get too formal,” Corrigan notes—is also a preeminent banker, Merrill Lynch C.E.O. John Thain, a Goldman alumnus and former head of the N.Y.S.E.  Over the years, Thain has often talked to Geithner—“sometimes I talk to him multiple times a day,”

Given this extensive set of interconnections, you might think that he’d be careful to project the right image when stepping into the Treasury role – but instead he saw fit to place a Goldman Sachs insider in the position as his top aide last January (before anybody was paying too much attention to all this insider self-dealing):

WASHINGTON — Treasury Secretary Timothy Geithner picked a former Goldman Sachs lobbyist as a top aide Tuesday, the same day he announced rules aimed at reducing the role of lobbyists in agency decisions.

Mark Patterson will serve as Geithner's chief of staff at Treasury, which oversees the government's $700 billion financial bailout program. Goldman Sachs received $10 billion of that money.

Just a few months later, in March, when questioned about the appearance of conflict of interest, Geithner bristled at the suggestion:

"I am just asking the questions," Waters said, "because the talk is…that this small group of decision makers at the center of it is Goldman Sachs and that's what's causing a lot of the distrust, because people are thinking or believing that Goldman Sachs, because of the connections, have had a lot to do with the decisions that are being made."

Geithner took umbrage.

"I think it's deeply unfair to the people who are part of these decisions to suggest that they were making judgments that in their view were not in the best interest of the American people," Geithner said.

Apparently Mr. Geithner found it completely confusing why anybody would see anything at all wrong with a regular revolving door between positions of extreme financial power over public money and the firms set to benefit from public money.

To me, that is a sure sign that someone is too deeply embedded, too deeply conflicted, too detached from reality to even know where to draw the line. Timothy apparently cannot distinguish between the “best interest of the American people” and Goldman Sachs raking in billions of undeserved public dollars. To him, those are one and the same thing and that's a major reason why I have grave doubts that the bailouts will succeed.

Now let’s cross into the surreal. One of the more grossly mismanaged companies on the face of the planet, the one that will cost taxpayers close to a trillion dollars when all is said and done, is Fannie Mae, the Government Sponsored Enterprise, or GSE. So who is it, do you suppose, that picked the CEO of Fannie Mae to run TARP? Could it be Summers and Geithner and Emanuel?

You bet. That’s the vetting team.

As far as I am concerned, the CEO of Fannie Mae should be defending himself in court, not running a massive wealth redistribution program.

Storing Wealth in Uncertain Times

Charles Hugh Smith questions the whether gold is the best way to store wealth in the coming "Great Transformation", when oil becomes very scarce. (I remember how valuable gasoline was in the movie Mad Max 2: The Road Warrior). He suggests that having a convenient supply of energy and food are the most valuable sources of wealth in very hard times. Excerpts below.

Link: Of two minds: The Great Transformation: Trends and Cycles of History.

If we understand that "money" as a store of wealth is simply stored energy, then we reach another understanding of "the problem" and thus of the "solution."

Let's say that the fragile supply chain of remaining oil breaks down in a complex interaction of positive feedback loops. Oil would not just be costly; it would be unavailable to individuals. The government would undoubtedly ration what was left for essential services like agriculture, food distribution, police and hospitals, etc.

Let's say we anticipated this and responded not by hoarding gold but by buying a 100 KWhr/day solar power array, productive land in a mild climate, a store of fertilizer and a few electric vehicles to share with our family/community. We own zero gold but we own a power supply, the means to grow food and transportation that does not require petroleum.

Now would we sell these productive assets for gold? At what price, if they were essentially irreplaceable? What would we do with our pile of gold if we can't go anywhere, can't grow food and have no power source?

The holder of gold assumes that all goods can be purchased with a means of exchange holding a tangible value, i.e. gold or an equivalent commodity. But this may not be entirely true. Yes, we will sell some of our power/energy output for gold, but we will not sell our "wealth" i.e. the power plant for gold, which may or may not be able to buy a replacement. As a store of wealth, gold is no match for a productive source of energy.

The reason is "money" as a store of wealth is simply stored energy. From this point of view, fertilizer is stored energy. You may or may not be able to exchange "money" in any form for stored energy, for "wealth" is either stored energy or the capacity to generate energy sustainably. Everything else is merely a means of exchange.

Will gold hold more value as a means of exchange than paper money? If history is any guide, yes—but that's a different "problem" than building or storing wealth.

There are many other examples of "problems" whose solutions may well completely fail to address the structural challenges we face.

Urban Homesteaders

Link: YouTube – Homegrown Revolution Trailer: Premiers Wild & Scenic Film Festival Jan 9-11

Homegrown Revolution (2008) is a film short that gives a brief introduction to the Dervaes Family's urban homestead which they call "Path to Freedom." On this tiny city lot, a beautiful and productive oasis was created, producing 6,000 lbs of food annually and is a model of urban sustainability.

Film premiers at the WILD & SCENIC FILM FESTIVAL (Jan 9-11, 2009)

http://www.wildandscenicfilmfestival.org

——About Path to Freedom——

Since the mid 1980s, members of the Dervaes family have steadily worked at transforming their ordinary city lot in Pasadena into a thriving organic micro farm that supplies them with food all year round. These eco-pioneers also run a successful home business providing their surplus produce to local restaurants. Through their adventures in growing and preserving their own food, installing a solar power system, home-brewing biodiesel for fuel, raising backyard farm animals, and learning back-to-basics skills, these modern-day pioneers have revived the old-fashioned spirit of self-reliance and resourcefulness.

Since 2001, their website has inspired hundreds of thousands to take steps towards a sustainable future and has generated a 21st century urban homestead movement.

visit their blog at http://www.urbanhomestead.org/journal

Growing Tomatoes On Your Deck

I haven't tried this technique. My wife's raised bed garden produces enough vegetables - we don't need to use our deck for food production. But perhaps many people could benefit from this low tech solution.

Link: The EarthTainer™.

A Revolutionary Alternative in Container Gardening is now available to all our gardening friends at TomatoFest.com.

Not too many years ago there was abundant space and unlimited water available for gardening. Today, with our postage-stamp size yards and increasingly scarce, rationed water resources, a new paradigm for water management by the home gardener has come to the forefront.

Traditional in-ground planting with "broadcast" watering is highly inefficient, along with creating an unintended weed bed to cope with. Result: higher water bills coupled with back-breaking labor in pulling weeds and constant cultivation. Consider a Hybrid alternative. The demand for multi-use energy sources such as solar and wind, plus the huge growth of dual fuel automobiles has sparked innovation in combining the best of hybrid technologies. The same opportunity for improved efficiency and plant yield exists in new growing environments for the home garden.

Ray Newstead
Ray Newstead
 

Enter Ray Newstead, a home gardener of heirloom tomatoes in Campbell, California. Newstead, a long time Silicon Valley resident and Executive with semiconductor company SMSC, has focused his spare time efforts in designing a "Green" self-contained vegetable growing eco-system dubbed the "EarthTainer". This container-based system combines the traditional soil-based growing cycle with elements of hydroponic moisture delivery to the plants for sustainable, organic gardening.

Unlike manual or drip irrigation top watering, the EarthTainer employs a bottom up, automated watering approach based on the principle of capillary action. Water stored in the lower reservoir is wicked up into the soil much like the wick in a candle draws the liquefied wax upward to the flame. Moisture meets the roots of the plant where the plant "drinks" just as much water as it needs. This water consumption will vary significantly throughout the growing season as the plant produces fruit, and by providing a constant supply of water from the reservoir, the plant can achieve optimal growth and productivity.

Newstead estimates that EarthTainer-grown tomato plants consume 75% less water than is used in conventional in-ground planting, as the "closed-loop" EarthTainer design concentrates 100% of the available water exclusively to the plant, not leaking any to encourage weed growth, nor wasted runoff. Additionally, the moisture barrier top cover reduces a significant moisture loss due to evaporation experienced in traditional in-ground gardening. With the June 4, 2008 Declaration of a statewide drought by the Governor of California, water conservation and efficient use of available water is crucial as uncertainty of future supply grows in magnitude.

EarthTainer gardening can make use of marginal growing space where concrete patios or deck areas may be the only sunny locations available to apartment or condo owners. The portable nature of the EarthTainer allows it to be moved or rotated during the growing season to balance plant growth, which is not possible with in-ground gardening. The container walls make it difficult for ground rodents to "stop in for a snack" and the isolation of the growing compartment inhibits soil-borne insect and disease transmission.

Newstead has found that the soil in the EarthTainer warms up to suitable planting temperature in Springtime one month earlier than his in-ground soil bed, permitting him to plant out in early April. In 2008, his harvest of ripe tomatoes began on May 25. "If there were an Energy-Star rating for garden devices, this design would top the charts", said Gary Ibsen, Founder of the Carmel TomatoFest. "The water saving advantage alone is extremely compelling. With the EarthTainer system , urban gardeners have a new alternative in growing their own quality vegetables."

While you can't buy an EarthTainer anywhere, Newstead has teamed up with Ibsen and his TomatoFest organization (www.tomatofest.com) to create a self-construction guide for download in PDF and video format (see video links below) for those with basic tools skills to make their own. These instructions are provided for you here as "Freeware". As Newstead puts it, "With the global food crisis escalating, I believe that spreading knowledge worldwide of how to build EarthTainer growing systems could help feed hungry people in impoverished areas around the world. Not just heirloom tomatoes, but corn, soybeans, and other high-nutrient crops can be grown."

All we request if you do use these design plans to build your own EarthTainer, is to make a voluntary contribution to the Feed The Children organization www.feedthechildren.org. Cost of purchasing components at Lowes or Home Depot to assemble the base unit runs approximately $23.00 and $18.00 for the optional self-supporting tomato cage system.

Download:

EarthTainer PDF Construction Guide

EarthTainer Construction Videos

You can view the video now or download a higher resolution version of the video for future reference during construction. To download the video right click on the "Download video" link and select "save link/target as".

Chapter 1 – Introduction and Building the EarthTainer   View video,   Download video
Chapter 2 – Assembling the Cage System   View video,   Download video
Chapter 3 – Planting   View video,   Download video